Many business-to-business (B-to-B) transactions, such as a company purchasing goods from a supplier, are handled via interactions between computer programs. Sometimes there may be a variety of different computer systems involved in a single transaction. One piece of software running on a supplier system may handle requests for proposals from companies and send terms for a transaction. Another piece of software running on a company system may receive the proposal and send a purchase order. Other pieces of software running on the supplier system and company system may handle invoicing and remittance of payments, respectively, and so on.
One area in which this can create an issue is in the area of discounts, and specifically the area of discounts provided for early payment. It is often beneficial for cash flow purposes for a supplier to offer a discount to a buyer who pays early. However, because a different system may be used to offer (and accept) the discount as to handle the remittance of payments, it can be difficult to ensure that the payment amounts are accurate.
Reconciliation of payment amounts is a common task for companies to perform. It is not uncommon, for example, for a payment to be received that differs from the invoiced amount due to a buyer leaving out freight, tax, or some other ancillary charge, or simply due to a miscommunication about the cost of certain items and/or which charges are included in a proposal. This reconciliation takes a tremendous amount of effort, however, and can be especially difficult in the case of early payment discounts, which can be difficult to track. One aspect that makes them difficult to track is that the amount due can actually vary based on when the payment is tendered. Thus, a remitted amount may be correct if paid on a certain date, but be incorrect if paid on a later date.
The challenge for buyers is that the individuals initiating discount instructions at the supplier may not necessarily be the same individuals reconciling the receivables with payment and remittance data. Additionally, the supplier in some cases may not necessarily update accounts receivable data with anticipated discounts, especially if their billing systems do not support changes or such changes are locked down for security reasons.
Payment remittance information is typically stored in a data structure known as a remittance advice. The remittance advice typically will indicate the invoice to which the payment pertains and the amount of the payment. What is needed is a mechanism to automatically reconcile remittance advice data structures in cases where early payment discounts are provided.